Credit Cards Blog

Checkout fee questions answered

I'm getting a lot of questions about a class-action lawsuit that has allowed retailers to charge people a checkout fee if they use a credit card.

The questions come after a provision in a preliminary settlement between retailers and Visa, MasterCard and major banks went into effect on Sunday. The provision allows merchants to recover the costs they are charged to accept credit cards.

Here are four common misconceptions or questions over the new credit card surcharge.

1. Are debit cards subject to the checkout fee?

The checkout fee only affects credit cards, not debit or prepaid cards under any circumstances. Even if the retailer runs a debit card as "credit," the credit card surcharge doesn't apply to you, according to Trish Wexler, a spokeswoman for the Electronic Payments Coalition. The EPC is a trade group that represents Visa, MasterCard and other card payment networks.

2. Who profits from the surcharge -- the banks or retailers?

Retailers who impose a credit card surcharge cannot profit from the fee under the settlement. The fee can only reimburse the cost the retailer is charged by Visa, MasterCard and the banks to run a credit card, called an interchange fee. Typically, stores pay between 1.5 percent and 4 percent of the total purchase each time a customer uses a credit card. Now, if retailers choose, customers will pay for their ability to use a credit card at the store. The extra fee goes to Visa, MasterCard and the banks. However, most retailers already have accounted for the interchange fee in the price of their goods and services and shouldn't need to surcharge to recoup costs, says John Ulzheimer, president of consumer education at SmartCredit.com.

3. My gas station has long charged more for credit card purchases. What has changed?

Retailers, including gas stations, have long been able to offer cash discounts to customers who pay by cash, check or PIN debit cards, Wexler says. Retailers offering cash discounts typically post two prices, one for cash and one for credit cards. Cash discounts are most commonly seen at gas stations and liquor stores.

"A cash discount would have been a fair way for retailers who wanted to steer their customers to other forms of payment," she says. "With surcharging, however, an argument can be made that retailers are double dipping. After all, these fees are already built into prices."

4. Who is charging this checkout fee?

You tell me. National retailers aren't saying what they'll do. I haven't seen any announcements about implementing this credit card surcharge. In fact, several major retailers such as Wal-Mart, Target and Home Depot are opposed to the settlement that provides the option to surcharge. There is some confusion over whether retailers that operate in states that ban surcharging can, at the same time, impose a surcharge in states that allow it. Read more about that in Tuesday's post. The EPC, MasterCard and the attorney for the retailers in the settlement case all say that retailers can impose surcharges in states that allow it, even if they operate in other states that don't. The National Retail Federation says they can't. Maybe that's one for the courts to decide.

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168 Comments

JT Harris

January 31, 2013 at 8:29 pm

Will retailers disclose this fee before the transaction takes place so that I can decide whether to use cash or credit?

Mark

January 31, 2013 at 8:06 pm

Arn...I think you're right. Stop using the cards....starve out the credit card companies. They're the ones making all the money.

Alan

January 31, 2013 at 7:54 pm

For those of us who are old enough: "what did we do before credit cards"?

Arn

January 31, 2013 at 7:44 pm

I think were getting hit enough with interest ,then to add this? Were just going to have to stop using cards. I'm tired of all these companies raising fees and pushing them to the consumer. Don't these companies see the economy is bad. People haven't gotten raises in years, but everyone keeps raising prices.

Mark

January 31, 2013 at 7:42 pm

I don't suppose any of you would care to have a 2% additional bite taken out of your paycheck each week...that's what the fees retailers pay is like. Retailers are in a tough competitive market. The statement that these fees are built in ahead of time is not necessarily true....especially with large ticket items. Sometimes the 2% is more like 3.50% because the customer uses a rewards card or a sky-miles card. These perks are not free....the retailer pays for them!!!

Meghan

January 31, 2013 at 7:37 pm

The surcharge is to pay for all the people that filed bankruptcy and people who commit theft and get away with it. The people who live responsibly pay for people who aren't responsible. Paying with cash & check is the only way to avoid the surcharge.

Art Johnson

January 31, 2013 at 6:52 pm

All you have to do stop shopping at stores that add a service fee and that will put a stop to service fees. Banks felt the impact of adding fees. Competition almost always works to correct problems like this.

Bobby

January 31, 2013 at 5:51 pm

As "Mica", above stated, my service station charges me $1.00 per transaction and the local Beer & Wine store charges $1.00 for purchases under $10.00. I pay it because i need the gas and i need the groceries too.

B. Horne

January 31, 2013 at 5:42 pm

We live in a world where greed and outright injustice prevail. It is all about the almighty $$$. When will people learn that material things are just that - things you think make you happy but really don't. I will personally cancel any credit card I now have if I am faced with this completely unjust action.

Mica

January 31, 2013 at 4:47 pm

Much to my amazement one such local business charges a dollar for each Debit and Credit Card transaction. So to keep my money in my pocket I pay by check or cash.

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